Credit crunch thwarts founder's Carpetright bid

The credit crunch claimed another victim yesterday as Lord Harris was forced to drop his £850m offer for Carpetright, the company he founded in 1988.

The consortium led by Harris and other members of the senior Carpetright management team said that since its proposal, made at the beginning of October, the credit markets had "deteriorated significantly with a consequent adverse impact on the availability of funding and cost of capital."

As a result, it said it had been unable to secure "the necessary level of funding on satisfactory terms" and had concluded that it was not in the interest of its stakeholders to continue discussions.

The news comes just ten days after Harris, who is also chairman and chief executive of the carpet retailer, said he was confident the deal would go through.

The consortium had offered £12.50 a share for the remaining 74.3% of the firm that Harris and other senior managers did not already own. The offer valued the remaining stake at £630m, and the entire company at £850m. It came at a premium of nearly 8% to the previous day's closing price. But shares yesterday closed down 188p at 880p - a near 30% discount to the offer price. Harris said: "The senior management team of Carpetright has devoted a significant amount of effort in recent months towards formulating its proposal and I am disappointed that, due to external market conditions, we are unable to proceed with an offer for the shares of Carpetright." He added: "I now look forward to focusing on the continued growth of the business in the UK and Europe in the New Year."

Carpetright has had a tough time of late in the UK, as a series of hikes in interest rates has weighed on consumer spending. The group posted a 1.4% fall in like-for-like sales in the UK for the year to end April.